[This post has been updated primarily to reflect the contents of
the proposing release as well as the statement of
Commissioner Hester Peirce.]

Those of you who expected the SEC to go big and propose raising
the current threshold for status as an "accelerated
filer" to be commensurate with the cap for "smaller
reporting companies" will be sorely disappointed, as will
anyone looking for regulatory simplification and harmonization.
Nevertheless, the SEC did address the big elephant in the
room—the SOX 404(b) auditor attestation
requirement—with a measured, narrowly tailored exception that
attempted to thread the needle with regard to the controversy over
exempting additional companies from SOX 404(b), viewed by some as a
critical investor protection. However, the resulting framework
proposed for determining filer categories and requirements adds
another layer of complexity to the current labyrinth, including
some rather head-spinning new transition provisions. Will
anyone—other than low-revenue smaller reporting
companies—be happy with the result?

At an open meeting on Thursday morning, the SEC voted (by a vote
of three to one, with Commissioner Robert Jackson dissenting) to
propose amendments to the accelerated filer and large accelerated
filer definitions that provide a narrow carve-out from these
definitions for companies that qualify as smaller reporting
companies and reported less than $100 million in annual
revenues in the most recent fiscal year for which audited financial
statements were available. As a result, if the proposal were
adopted, those companies would no longer need to comply with the
shorter timeframes for filing periodic reports applicable to
accelerated filers and large accelerated filers. And, most
significantly, the proposed revision would mean that those
companies qualifying for the carve-out would no longer be subject
to the SOX 404(b) auditor attestation requirement, which has been
anathema to many deregulation advocates. In addition, these
companies would not have to provide disclosure regarding unresolved
staff comments on periodic reports or whether they make their
filings available on their websites. Notably, companies with public
floats between $75 million and $250 million would still be subject
to all of the accelerated filer requirements unless their
revenues were under the $100 million revenue cap.

In addition, the proposal would increase from $50 million to $60
million the transition thresholds for accelerated and large
accelerated filers to become non-accelerated filers and increase
the threshold for exiting large accelerated filer status from $500
million to $560 million. And, the proposal would add more
complexity with a new revenue test as part of the transition
thresholds for exiting both accelerated and large accelerated filer
status.

(Partially based on my notes, so standard caveats apply.)

The loose end after the SRC
amendments. You may recall that in June 2018, the SEC
approved amendments
that raised the SRC cap from "less than $75 million" in
public float to "less than $250 million" and also
included as SRCs companies with less than $100 million in annual
revenues if they also had either no public float or a public float
of less than $700 million. Those changes, however, laid waste to
the alignment between the categories of "smaller reporting
company" and "non-accelerated filer," with the
result that some companies are now categorized as both SRCs and
accelerated filers or, surprisingly, even large accelerated filers.
The SRC adopting release indicated that many commenters took the
opportunity to recommend that the SEC increase the public float cap
in the accelerated filer definition commensurate with the cap in
the new SRC definition, arguing that the costs associated with SOX
404(b) were burdensome and "divert capital from core business
needs." Although the SEC elected not to raise the accelerated
filer cap at that time, notwithstanding the admitted additional
regulatory complexity, Chair Clayton did direct the staff to
formulate recommendations "for possible additional changes to
the 'accelerated filer' definition that, if adopted, would
have the effect of reducing the number of companies that qualify as
accelerated filers in order to promote capital formation by
reducing compliance costs for those companies, while maintaining
appropriate investor protections." Instead of raising the
thresholds in the accelerated filer definition altogether (which
would have provided the benefit of harmonizing the categories of
non-accelerated filer and SRC), the staff crafted a more tailored
exception that may perhaps be more palatable to those concerned
about the possibility of eliminating the auditor attestation for a
subset of SRCs.

Proposed changes to the accelerated filer
definition. Under SOX 404(c), companies that are
neither large accelerated filers nor accelerated filers are exempt
from the auditor attestation requirement for internal control over
financial reporting. The new proposal would "amend the
accelerated and large accelerated filer definitions in Rule 12b-2
to exclude any issuer that is eligible to be an SRC under the SRC
revenue test."

More specifically, under Rule 12b-2, to be an accelerated filer,
a company must satisfy three conditions, the first of which is that
the company has a public float of $75 million or more, but less
than $700 million, as of the last business day of the company's
most recently completed second fiscal quarter. A large accelerated
filer must have a public float of $700 million or more as of the
same date. Under the current rules, an accelerated filer can also
be an SRC if it has a public float of $75 million or more, but less
than $250 million, regardless of annual revenues; or a public float
of more than $250 million, but less than $100 million in annual
revenues. The proposal would add a new fourth condition to the
definitions of accelerated and large accelerated filer: that the
company is not eligible to be an SRC under the revenue test (in
paragraphs (2) or (3)(iii)(B), as applicable) of the "smaller
reporting company" definition in Rule 12b-2. (By referring to
the paragraphs, the SEC intends to add flexibility in the event the
thresholds change in the future. Note, however, that paragraph
(3)(iii)(B) consists of a complicated table.)

The SEC's two tables below illustrate the change:

Existing Relationships between SRCs and Non-Accelerated and
Accelerated Filers

Status

Public
Float

Annual
Revenues

SRC and Non-Accelerated
Filer

Less than $75
million

N/A

SRC and
Accelerated Filer

$75 million to less than
$250 million

N/A

$250 million to less
than $700 million

Less than $100
million

Accelerated Filer (not
SRC)

$250 million to less
than $700 million

$100 million or
more

Proposed Relationships between SRCs and Non-Accelerated and
Accelerated Filers

Status

Public
Float

Annual
Revenues

SRC and
Non-Accelerated Filer

Less than $75
million

N/A

$75 million to less than
$700 million

Less than $100
million

SRC and Accelerated
Filer

$75 million to less than
$250 million

$100 million or
more

Accelerated Filer (not
SRC)

$250 million to less
than $700 million

$100 million or
more

Because the SEC continues "to believe that the ICFR auditor
attestation requirement incrementally can contribute to the
reliability of financial disclosures, particularly for issuers that
typically have more complex financial reporting requirements and
processes," the SEC chose not to eliminate the requirement for
all accelerated filers that are SRCs. Rather, the SEC proposed
"a more tailored approach that recognizes that the impact of
the ICFR auditor attestation requirement on the reliability of an
issuer's financial disclosures is not necessarily the same
across all issuers, including all SRCs." The SEC views the
approach taken as analogous to other past approaches that opted for
scaled disclosure.

SEC rationale. The SEC acknowledges that, because one
effect of the proposed amendments is to increase the number of
companies exempt from the auditor attestation requirement
(estimated at 539 additional companies), investors would receive
less disclosure about ICFR and material weaknesses regarding
low-revenue SRCs. However, because many of the ICFR-related
protections would remain in place even without an attestation, the
SEC was not convinced that the change would be especially
problematic:

"based on our experience with these matters, including in
the cases of EGCs, SRCs, and other smaller reporting issuers, we
believe it is unlikely there would be a significant effect on the
ability of investors to make informed investment decisions based on
the financial reporting of those issuers. A non-accelerated filer
that meets the SRC revenue test would remain subject to many of the
same obligations as accelerated and large accelerated filers with
respect to ICFR, including the requirements for establishing,
maintaining, and assessing the effectiveness of ICFR and for
management to assess internal controls. Additionally, pursuant to
the PCAOB's recently adopted risk assessment standards in
financial statement audits, in many cases auditors are testing
operating effectiveness of certain internal controls even if they
are not performing an integrated audit."

That is, an independent auditor would still be required "to
consider ICFR in the performance of its financial statement audit
of an issuer, if applicable," even if the company were not
subject to the ICFR attestation requirement. In addition,
"evaluation and communication to management and the audit
committee of significant deficiencies and material weaknesses in
ICFR are required in both a financial statement audit and an ICFR
attestation audit." Further, "auditors may also test
operating effectiveness of internal controls in a financial
statement audit, such as when the auditor determines to rely on
those controls to reduce the substantive testing." The SEC
estimated, for companies affected, the proposal would result in an
average cost saving of about $210,000 per company annually.

In addition, the SEC suggests, "the benefits of the ICFR
auditor attestation requirement may be smaller for issuers with low
revenues because they may be less susceptible to the risk of
certain kinds of misstatements, such as those related to revenue
recognition. Also, it is possible that low-revenue issuers may have
less complex financial systems and controls and, therefore, be less
likely than other issuers to fail to detect and disclose material
weaknesses in the absence of an ICFR auditor attestation.
Additionally, we note the financial statements of low-revenue
issuers may, in many cases, be less critical to assessing their
valuation given, for example, the relative importance of their
future prospects."

SideBar

As reported here, MarketWatch enlisted Audit
Analytics to identify public companies with revenue under $100
million "that received a negative opinion from their auditors
on their internal controls over financial reporting. Audit
Analytics counted 176 companies that received adverse opinions on
their internal controls since 2014. That represents 70% of all
adverse internal control opinions issued for all public companies
and 16.5% of the opinions issued for companies with less than $100
million in revenue that were required to do so."

Similarly, the WSJ cites a 2017 academic study that
"estimated that 20% of exempted firms had ineffective internal
controls from 2007 to 2014. During that same period, just 11% of
them actually disclosed such a weakness. They also found that 41%
of exempted firms provided insufficient information to identify the
causes of the weaknesses in their internal controls, compared with
just 7% for firms that were complying with the Sarbanes-Oxley
rules. According to the study, the smallest companies not currently
exempt from required internal-controls audits would have paid an
additional $73,165 a year in audit fees. The SEC estimated that
annual costs related to outside audits are higher, around $225,000
per company."

Revisions to the transition provisions. The SEC is also
proposing to revise the transition provisions applicable to
companies exiting accelerated and large accelerated filer status.
Under current rules, an accelerated filer will not become a
non-accelerated filer unless it determines at the end of a fiscal
year that its public float had fallen below $50 million on the last
business day of its most recently completed second fiscal quarter.
Similarly, a large accelerated filer will lose its status as a
large accelerated filer if its public float had fallen below $500
million on the same date, becoming an accelerated filer if its
float is at $50 million or more, and a non-accelerated filer if its
public float falls below $50 million. The "proposed amendments
would revise the public float transition threshold for accelerated
and large accelerated filers to become a non-accelerated filer from
$50 million to $60 million. Also, the proposed amendments would
increase the exit threshold in the large accelerated filer
transition provision from $500 million to $560 million in public
float to align the SRC and large accelerated filer transition
thresholds." These new public float transition thresholds
represent 80% of the initial thresholds, consistent with the
approach taken for the transition thresholds for SRC
eligibility.

The SEC's tables below show these changes:

Existing Requirements

Initial Public
Float Determination

Resulting Filer
Status

Subsequent
Public Float Determination

Resulting Filer
Status

$700 million
or more

Large
Accelerated Filer

$500 million or
more

Large Accelerated
Filer

Less than $500 million
but $50 million or more

Accelerated Filer

Less than $50
million

Non-Accelerated
Filer

Less than
$700 million but $75 million or more

Accelerated
Filer

Less than $700 million
but $50 million or more

Accelerated Filer

Less than $50
million

Non-Accelerated
Filer

Proposed Amendments to the Public Float
Thresholds

Initial Public
Float Determination

Resulting Filer
Status

Subsequent
Public Float Determination

Resulting Filer
Status

$700 million
or more

Large
Accelerated Filer

$560 million or
more

Large Accelerated
Filer

Less than $560 million
but $60 million or more

Accelerated Filer

Less than $60
million

Non-Accelerated
Filer

Less than
$700 million but $75 million or more

Accelerated
Filer

Less than $700 million
but $60 million or more

Accelerated Filer

Less than $60
million

Non-Accelerated
Filer

The proposal also includes changes to the transition rules
related to the SRC revenue test. For those who want to get
granular, see the detail in the SideBar below.

SideBar

This is how the SEC describes the proposed new transition rules
related to the new revenue test for an accelerated filer: A company
that is already an accelerated filer would remain an accelerated
filer unless either its public float falls below $60 million or it
becomes eligible to be an SRC under "the revenue test in
paragraphs (2) or (3)(iii)(B), as applicable, of the SRC
definition. An issuer that is initially applying the SRC definition
or previously qualified as an SRC would apply paragraph (2) of the
SRC definition. Once an issuer determines that it does not qualify
for SRC status, it would apply paragraph (3)(iii)(B) of the SRC
definition at its next annual determination." In essence,
according to the release, "under the proposed amendments, an
accelerated filer would remain an accelerated filer until its
public float falls below $60 million or its annual revenues fall
below the applicable revenue threshold ($80 million or $100
million), at which point it would become a non-accelerated
filer."

The proposal also includes conforming amendments to the large
accelerated filer transition provisions covering the transition
from large accelerated filer to either accelerated or
non-accelerated filer status.

"A large accelerated filer would become an accelerated
filer at the end of its fiscal year if its public float fell to $60
million or more but less than $560 million as of the last business
day of its most recently completed second fiscal quarter and its
annual revenues are not below the applicable revenue threshold ($80
million or $100 million). The large accelerated filer would become
a non-accelerated filer if its public float fell below $60 million
or it meets the revenue test in paragraph (2) or (3)(iii)(B), as
applicable, of the SRC definition. For a large accelerated filer to
meet the SRC revenue test, generally [with one exception], its
public float would need to fall below $560 million as of the last
business day of its most recently completed second fiscal quarter
and its annual revenues would need to fall below the applicable
revenue threshold ($80 million or $100 million)."

For examples of the application of these transition provisions,
see footnote 95 of the release.

Commentary at the open meeting. In his statement at the open meeting, SEC Chair Jay
Clayton characterized the proposal as a "retrospective review
of one component" of SOX, observing that there are "many
components" of SOX, including a number supporting the
independent audit committee and enhanced auditor independence
requirements, which have made significant contributions to the
quality of financial reporting and are not affected by the proposal
(a concept that Commissioner Elad Roisman echoed as well in his statement). In addition, Clayton emphasized
that these SRCs will continue to be required to "establish,
maintain, and assess the effectiveness of their internal control
over financial reporting (ICFR)." Off-script, he also noted
that, as part of the audit, auditors will continue to be required
to assess ICFR. The difference will be the absence of the auditor
attestation, which, for this subset of companies, was viewed to add
disproportionate costs and was considered "unlikely to enhance
financial reporting or investor protection." In his view, the
"proposed amendments are intended to reduce costs without
harming investors for certain smaller public companies and,
importantly, encourage more companies to enter our public
markets..."

Clayton also made the point that the "retrospective review
in this area" was not novel and, in fact, was also the subject
of subject of Congressional review in the JOBS Act, with the
determination to eliminate the SOX 404(b) requirement for
"emerging growth companies":

"That is, Congress, itself engaging in retrospective
review, recognized that the compliance costs of certain aspects of
Sarbanes-Oxley requirements do not scale with the size of the
business, and those incremental and recurring costs can deter
smaller companies from accessing our public capital
markets....Notably, [the representation of these smaller companies]
in our public markets has disproportionally decreased over the
years. The lower-revenue companies affected by the proposed
amendments generally have simpler financial statements. In fact,
our economists do not expect that exempting these companies from
the ICFR auditor attestation requirement would weaken the
effectiveness of the ICFR or increase restatement rates compared to
those companies that would remain accelerated filers....Investors
in these companies will benefit from tailored requirements that
will save costs that companies would be able to re-direct into
growing their companies by investing in productive areas such as
research and human capital."

Corp Fin director Bill Hinman also emphasized that companies
subject to the exception would remain subject to the ICFR
management's assessment requirement as well as the general
requirement to assess ICFR as part of the audit. The low-revenue
companies exempted through the carve-out generally have less
complex financial statements, he contended, and are less likely to
have many of the typical control lapses, such as those related to
revenue recognition. As a result, he maintained, the auditor's
attestation constituted a disproportionate burden on these
companies but was less critical to their evaluation by the market
(which would likely evaluate them at this point based more on their
prospects and investment outlook than on their financial results).
For example, Hinman said, 36% of companies affected by the proposal
were in the pharma/medical device space. Although these companies
may have larger market caps, they are often in the early stages of
product development and, therefore, frequently have no or extremely
low revenues. As a result, they typically have less access to
internally generated capital for necessary reinvestment in
R&D.

In his statement, Jackson took issue with the
proposal, which he characterized as a "roll back" of SOX
404(b). In essence, he criticized the proposal's analysis of
the costs of attestation as "based on data that's over a
decade old, and the proposal makes no real attempt to assess the
investor-protection benefits of gatekeepers in our markets."
Indeed, Jackson and his staff conducted their own analyses based on
more current data, and, as a result, he concluded that
"it's clear that this proposal has no apparent basis in
evidence." (Might that explain why the DERA representative at
the open meeting kept referring to aspects of the economic analysis
as "preliminary"?)

Harkening back to the debacles at Enron and WorldCom, Jackson
argued that SOX 404(b) was adopted to "deter managers from
fudging the numbers.... While paying auditors isn't free,
neither is fraud. And fraud is more likely when insiders are less
careful about controls. That's why, when we roll back
protections like these, we can expect the cost of capital to rise;
investors will either diligence the risk of fraud themselves or
require higher returns to protect against that risk. There's a
tradeoff; and hard evidence from the market, not ideological
intuition, should tell us how to strike that balance."

A key reason given for the proposal was to encourage more IPOs,
he said, but that type of deregulatory effort has not been
successful in the past, and that's because "investors know
better than Washington insiders about the value of protections like
Section 404(b)." In effect, Jackson was renewing the debate
that has been ongoing among the Commissioners and in the public
sphere about the reasons for the decline in recent years in the
number of IPOs and public companies: is the decline attributable
primarily to regulatory burden or is it attributable to any of a
variety of other reasons, such as the substantial availability of
capital in the private markets. While the companies subject to the
proposal may have found the costs of attestation most burdensome,
Jackson noted, "it's equally possible that these are the
firms—high-growth companies where the risk, and consequences,
of fraud are greatest—where the benefits of the auditor's
presence are highest."

More specifically, Jackson criticized the economic analysis for
relying on data from 2004 showing "that companies with a
public float under $75 million—the level under which auditor
attestation is not required—seemed to 'bunch' under
that threshold," suggesting that they intentionally kept their
floats low to avoid SOX 404(b) costs. Jackson's own study using
current data showed that the "bunching" phenomenon was no
longer true: "That's why, in 2011, the Office of our Chief
Accountant examined the costs of the attestation requirement and
reported to the Commission that there was no longer any
'specific evidence that [any savings from rolling back 404(b)]
would justify the loss of investor protections.'"

Jackson also contended that the proposal was flawed because it
made "no serious attempt to evaluate the benefits of
attestation." So, his office studied

"how investors react to news of an internal control failure
in two groups of companies: those that would receive a rollback of
404(b) under today's proposals and those who would not. The
evidence is striking. The data show we are proposing today to roll
back 404(b) for exactly the group of companies where investors care
about the benefits of auditor attestation most.... That
result has many possible explanations, all of which are worth
considering. One is that investors are concerned that companies of
this size are particularly prone to accounting issues. But whatever
the reason, the data show that investors care most about the
information produced by the attestation requirement at exactly the
firms that today's proposal would exempt from Section 404(b).
The views of the ordinary American investors who put their savings
at risk in these companies deserve far more weight than this
proposal gives them."

SideBar

In 2015, the SEC's Advisory Committee on Small and Emerging
Companies (now called the Small Business Capital Formation Advisory
Committee) recommended that the SEC attempt to harmonize the jumble
of rules applicable to the various categories of small companies
and, specifically, that the SEC increase the threshold for
"accelerated filers" to include companies with a public
float of $250 million or more, but less than $700 million, with the
result that the requirement to provide an auditor attestation
report under SOX 404(b) would no longer apply to those companies.
(See
this PubCo post.) However, in the release proposing the change to the SRC
definition in 2016, the SEC expressly rejected that Committee
recommendation on the basis of the 2011 staff study to which
Jackson referred above. That 2011 study found

"no specific evidence that any potential savings from
exempting registrants with public floats between $75 million and
$250 million from the auditor attestation provisions of Section
404(b) would justify the loss of investor protections and benefits
to registrants from such an exemption. Rather, the staff found that
accelerated filers (including those with a public float between $75
million and $250 million) that were subject to the Section 404(b)
auditor attestation requirements generally had a lower restatement
rate than registrants that were not subject to the requirements.
Moreover, the staff found that the population of registrants with
public floats between $75 million and $250 million did not have
sufficiently unique characteristics that would justify
differentiating this population of registrants from other
accelerated filers with respect to the Section 404 auditor
attestation requirements."

The proposing release also observed that subsequent academic
research on this topic was mixed. As a result, the SEC did not
propose to raise the accelerated filer public float threshold or to
modify the SOX 404(b) requirement as part of that proposal. The SEC
did, however, request comment on the issue. The Committee's
final report in 2017 reiterated its recommendation to amend the
"accelerated filer" definition.

On the other hand, in her statement, Commissioner Hester Peirce
indicated that, while she supported the proposal, she had
reservations about its scope. Although she viewed the proposal as
"a step in the right direction," she did not believe that
it went "far enough. The complexity remains; there still will
be many SRCs that are also accelerated filers. The process of
determining whether a company is an SRC and a non-accelerated
filer, or an SRC and an accelerated filer, or outside of both
categories is so complicated that even we at the SEC need diagrams
to figure it out. The fact that we ourselves struggling to
understand our own regime does not bode well for smaller companies
trying to follow our rules without the benefit of a staff of
seasoned securities attorneys." The resulting complexity in
the definitions, she said, required a navigation tool to comply.
(Taking into account the rather byzantine transition provisions,
she may have a point!) She also thought that the SEC was
"missing the substantive mark. We are not proposing to exempt
all SRCs from 404(b), and the SRCs that are not exempt will
continue to receive auditor bills for 404(b)," which the SEC
currently estimated to be an increased cost of 25%. While she
agreed that the proposal involved trade-offs, she believed that, in
many instances, "investors would rather see their money being
used for something other than 404(b) compliance, such as research
and development or hiring new employees."

SideBar

Since the proposal regarding the definition of SRCs was issued
in 2016, many critics have trained their sights on SOX 404(b),
arguing that it is a significant contributor to the type of
regulatory overload that some argue has deterred companies from
conducting IPOs; the attestation audit was just too time-consuming
and expensive for many smaller companies.. Moreover, they contend,
requiring controls audits for smaller companies did not make much
sense, especially for pre-revenue companies such as many smaller
biotechs that had little revenue and few employees. In those cases,
the cost of the controls audit would divert capital from other more
important uses, such as R&D. In one example cited by a critic,
the cost of the controls audit for one small public biotech with
fewer than 60 employees and a public float of $85 million added 1%
to the company's burn rate. In addition, critics have argued
that controls audits did not add much value: in one study, 84% of
restatements were not preceded by reports of material weaknesses;
that is, they contend, the 404(b) audits failed.

Advocates of SOX 404(b), however, have emphasized that internal
controls are the backbone of the financial statements, and some
auditors view the attestation as more important than the audit
itself. According to Audit Analytics, the percentage of adverse
internal control auditor attestations decreased from 15.7% in 2004
to 5.3% in 2015. In its 2015 Financial Restatements Report, Audit
Analytics "found that after the implementation of SOX there
was a massive increase in financial restatements that peaked at
1,851 in 2006. That number declined significantly to just 737 in
2015." In addition, it "found that the financial impact
on net income has also declined. Restatements of $3 billion to $6
billion were made in each year between 2002 and 2006. Since 2008
only one year had a restatement that has impacted net income by
more than $1 billion." Its 2017 Financial Restatements Report showed that
total restatements had dropped for three consecutive years to a
17-year low. Moreover, there were 184 restatements filed by
accelerated filers and 236 by non-accelerated filers. An EY report
showed a similar result: following the effectiveness of the SOX
attestation requirement, from 2005 to 2016, the number of financial
restatements declined by 90%, and the aggregate amount of net
income involved in restatements declined from $6 billion to $1
billion. Likewise, advocates contend, a GAO study found that
companies exempt from controls audits had more restatements, while
another study showed that companies that had controls audits had
higher valuation premiums and lower cost of debt. Advocates also
note that the cost of the attestation audit has declined over time,
particularly incremental costs as part of an integrated audit. (See
this PubCo post,
this PubCo post and
this PubCo post.)

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions